Thursday, June 22, 2006

A version of net neutrality I can endorse

In an attempt to offer something constructive, here's a version of network neutrality--let's call it Lippard Network Neutrality--that seems to me to be reasonable, providing me with what I want as a consumer of Internet services and what I would want if I were managing security for the provider of those services:

1. Nondiscrimination

Companies that provide facilities-based wireline broadband (i.e., those who own the last-mile wires) to residences must provide unrestricted Internet access to their customers who wish to purchase Internet access, allowing the use of any Internet service or application that does not violate any laws or cause degradation or disruption to the service or other customers. The provider may engage in filtering for consumer-grade service in order to prevent the spread of malware and the sending of spam, including (for example) SMTP filtering or redirection to the provider's mail services, but must allow the purchase of business-grade service under which customers may operate their own mail servers. The provider retains the right to suspend service or quarantine users that send spam, become compromised with malware, or engage in illegal activity or activity that disrupts the service.

2. Unbundling

Providers must unbundle Internet access from other services sold over the same connection, so that a customer may use the entire capacity of the circuit for Internet access.

These two requirements would give me what I want as a customer, as well as give the provider the ability to recover their costs, provide services that use QoS, provide additional filtering to protect their network and the rest of their customer base from malware, and so on. I think it's quite reasonable for a basic consumer Internet service to do port 25 filtering, force the use of the provider's mail servers, and to do network-based filtering of malware--but I would like the ability to pay extra for completely unfiltered Internet service and take steps to protect myself. And in fact, that's what I'm currently paying Cox for today--I pay for business-grade service to my home in order to run my own servers here, though I could put those servers into a colo facility and get the same effect, which is what I would do if Cox decided to discontinue offering business-class service to residences. Because that option exists, it would not be necessary to mandate that providers must provide business class service as I described above, but I'd still want to be able to ensure that I could access my remotely hosted services from home.

How this differs from what many network neutrality advocates are arguing for:

1. I don't prohibit QoS or tiering, as that is a genuinely useful network feature where I expect to see future innovation of services that depend on it.
2. The nondiscrimination provision is written to allow some kind of less-than-full-Internet walled garden service at low cost--so long as customers can still purchase real Internet service. (I think such a service would be under competitive pressure to allow access to the full Internet, for the same reason AOL ended up allowing full Internet access--otherwise the service wouldn't attract enough users to be a successful product offering.)
3. I don't prohibit differential pricing for different services and classes of service.
4. I don't set any restrictions on contractual arrangements (apart from these two restrictions), including interconnection agreements or who pays. I think that should be left to private negotiation and competition.
5. I don't extend these requirements to other types of Internet providers such as backbone providers or those providing business services, as those are areas with plenty of competition.
6. I don't extend these requirements to wireless providers, because I think that with sensible market-based allocation of spectrum, there could be plenty of independent competition with much less capital expenditure than for wireline deployment.

I could possibly be persuaded that there is a place for common carriage requirements, especially for access circuits to businesses, which is where the last-mile providers could really engage in anti-competitive behavior against backbone providers that don't own a lot of last-mile wires (e.g., Level 3, Global Crossing, Sprint), now that the major telco last-mile providers have each merged with a major backbone provider themselves (Qwest/U.S. West, AT&T/SBC/BellSouth, Verizon/MCI). This requirement currently exists in the law for telcos, and unlike the common carriage requirement for DSL, is not planned to go away next year.

I would not put the above into the purview of the FCC, at least not with their current dispute resolution procedures which favor the telcos. Paul Kouroupas at Global Crossing (also my employer) has been arguing for "baseball-style" or final arbitration dispute resolution, where each side submits their best and final offer to an arbitrator, who chooses the best. This provides incentive for each side to try to reach the best agreement up front, as well as a process that can proceed quickly, without any government involvement or expense. This suggestion is the second point of Global Crossing's proposed REFORM legislative agenda. (Unbundling and common carriage of bottlenecks such as last-mile access circuits are the sixth point.)

Comments, criticisms? I should add that I believe what I've spelled out above is pretty close to what I've heard is in Sen. Stevens' telecom reform bill, though I haven't read it and I suspect he applies the nondiscrimination and unbundling requirements more widely than to residential broadband.


RedBankTV said...

Jim, one of my favorite parts of your proposal is the baseball-style dispute resolution. I’d like that much better than settling disputes by the FCC or in the courts.

Overall I think your proposal is well thought out and level headed and it does seem to share a lot with the Stevens proposal.

I’ve been trying to think through how the telcos would most likely implement Access Tiering. I can’t see an ISP ever truly blocking access or restricting bandwidth to a service; it just wouldn’t look good and could open them up to potential lawsuits. I think they are more likely to give the consumers additional dedicated bandwidth, at no extra charge, for exclusive use of a partner’s service. (For example, if you are on a 10mbps plan they will give you an additional 5mbps dedicated to MSN services) I think this will have some of the same long term affects on competition that NN proponents are worried about but the approach is a lot more subtle.

My question in regards to the LNN proposal is: Would an ISP be allowed to offer the service I outlined above? Would the unbundling provision prevent this?

Thanks -- Tom

Lippard said...

Tom: Good question. Given the way I've written it, a provider could offer a plan such as you describe (pay for 10 Mbps, get an extra 5 mbps dedicated to MSN services)--but you would also still be able to pay for 15 Mbps of full Internet. You'd have to pay for that extra 5 Mbps in that case, though.

Thinking about it overnight, I'm not sure I wrote out my nondiscrimination provision with enough appropriate qualifications to permit the kind of anti-spam activity that I think providers need to be able to perform. Specifically, it needs to permit providers to ban spam-support services which may not directly cause disruption or degradation, but which are part of the supply chain for spam services. I would include in that providing DNS for spammers, web pages for spammed-for content, and distribution and sale of spamming tools the use of which is intended to violate the spam provisions of the AUP. (See the Global Crossing acceptable use policy for what I think a good AUP looks like.)

Further, I think a consumer ISP should be able to set restrictions on content hosted by their users which are more restrictive than just what's illegal, if they choose--this has no real anti-free speech effect since users will typically host web content at a web provider.

mitchipd said...


I think your proposal is a step forward in the discussion. But I have a concern that's raised by Tom's question and your reply to it. It relates to the ability of duopoly pipe-owners/ISPs to use their market power in anti-competitive ways, by adjusting the relative pricing of the bundled "5 Mbps + MSN" service vs. the unbundled version of the 5 Mbps service.

As I discussed in the post cited below, I think the Shaw-Vonage situation sometimes cited in the NN debate speaks to this issue:

In that post I said:

"From a competitive pricing perspective, Shaw’s $10 QoS surcharge seems pretty smart. But it also can be seen as evidence that network owners have both economic incentives and abilities to manipulate pricing to squeeze margin and economic vitality from competitive offerings. And, as I discussed yesterday, I think that’s a fundamental problem for the Internet’s future.

A related aspect of this issue is discussed in this thread:

Though I'm really concerned about this issue, I think both my posts cited above suggest that I'm skeptical that any NN-focused regulatory approach can be effective in avoiding a migration of the Internet into an increasingly cable-TV-like business structure.

My preferred approach is to encourage construction of municipal/public "Internet packet roads" that provided wholesale connection and related services and are technically simpler yet superior to cable and telco networks (which are overly complex evolutions of legacy networks built for and still used mainly for other purposes).

I think a solid economic-justification case can be made for "public" (or public/private) investment in such networks which, in addition to providing commercial services, would also support the communication needs of local government and other "public" entities, and could also be partly cost-justified by direct and indirect "social" benefits, much of which would manifest as "externalities" that could not be captured by investments made on a strictly profit-oriented basis, which means they would not be pursued by private capital even though they may be very valuable to society. This, after all, is an essential role of governments….to pursue "public good" investments (e.g., roads) that generate a lot of externalities that are not well-enough addressed by private investment markets.

Lippard said...

I don't understand the concern about the Shaw offering. They are offering to allow you to get better-than-best effort service for third-party VoIP service for a fee. If you want to continue to use a third-party VoIP service on best-effort Internet, there's no charge--their offering in no way impacts the service that was previously available, but the offering gives the customer a way to ensure that their voice traffic packets will be the last to be dropped in circumstances of congestion within Shaw's network, which, given a lot of cable modem customers, is bound to occur from time to time. There are literally millions of compromised systems churning out spam, engaging in scan and sploit activity, and launching denial of service attacks, and better than 99% of them are sitting in people's homes, on consumer broadband connections.

What possible reason could there be to ban Shaw's offering (which strikes me as insane) or prevent them from charging for it? If you force them to allow anybody to put whatever traffic they want at a higher class of service, with no additional charge, then you've broken the QoS offering--everybody will just put all of their traffic at that level, rather than limiting it to traffic that actually has *need* to be there due to latency/jittery requirements.

There's a reason that toll-roads work, and congestion pricing works in downtown London. It causes those who don't really have the time constraints to defer their use to other times or places.

As for the bundled service offering, of course it can be offered cheaper--there's going to be a subsidy to the Internet component from the non-Internet component, just like advertising-subsidized content. If you want the advertising-free service, you're going to have to pay a premium.

As for the example in the link about the Internet component being ratcheted down to 1% of the bandwidth--I think that example is unrealistic because it won't offer consumers what they demonstrably want (see AOL), there's sufficient competition to prevent it, and if it were possible for providers to collude into pushing such a thing as the only option, it's quite obvious there would be a huge outcry, petitions to Congress, and lawsuits over it. No provider would want to deal with that.

I'm quite confident that best-effort Internet services are not going to become slower than today, even if they end up becoming a smaller percentage of the total pipe, unless actually interest in Internet declines. Given the history of communications, I think interest in services between individuals will continue to increase, not decrease, and providers who fail to cater to that will lose customers.

Lippard said...

Clarification: It's not Shaw's offering that strikes me as insane, it's the idea of prohibiting it.

I'll also note that my impression of Shaw's offering is that it is engineered the same way Global Crossng engineers QoS on its network for our VoIP traffic. See my posting on Dave Siegel and QoS in my net neutrality index for more detail on that.

mitchipd said...


Two quick points after giving your reply a quick read:

First, AOL didn't own the pipes, so lacked market leverage, especially when competing with pipe owners that dominated the broadband ISP space. Today's broadband ISPs own the only two access pipes in most areas. This vertical integration, which includes control of an essential bottleneck access facility, means they have market leverage to exert in protecting the market position of their walled gardens. AOL didn't have that. In fact, their whole business model became increasingly squeezed by broadband pipe-owner wholesale charges, which put even further squeeze on their price/value equation which, in turn, aggravated the problems associated with their walled garden model. To a large extent, pipe owners can control the end-user price value equation, not only for themselves, but to some extent, also for other service providers. So, in my view, the AOL example is not very relevant.

Second, if the pipe owners have control over how "best effort" Internet service is managed and prioritized in relation to walled-garden/in-house/affiliated offerings, then they have control at the margins with regard to the service-quality differential between best-effort services and in-house/affiliated services (and these margins are important when it comes to perceived service quality, customer buying decisions and long-term business sustainability of service providers). And they also have control over how much they charge service providers for QoS. That means they have a lot of control over the relative value equation delivered by independent best-effort services and QoS-supported services.

And I don't think that, in a duopoly market, there's enough market pressure (as their was when AOL faced competition, including from pipe-owner broadband ISPs) to keep pipe-owners from juggling their pricing and technical parameters to keep strengthening their own market position and weakening competitive service providers. As I said in my post, I don't think that's "evil." But I do think it'll happen (they are, after all, trying to maximize share, margins and profits) and that it'll tend to choke off competition and, over time, innovation, because it will enable pipe-owners to extract higher and higher portions of the value of innovation generated by independent service providers by "managing" this price/performance optimization, which is an optimization geared toward their market share and margins, not toward the ultimate value delivered to customers. The greater the market power, the less focus there needs to be on satisfying customers.

So, to me, the answer is facilities-based alternatives that lessen the power of the duopolists. Until that happens, I think the scenario I outline here is likely to evolve over time. It may not lead to "the end of the Internet," but my sense is that it'll head generally in that direction. One potential positive impact of this is that it may motivate companies like Google to invest in alternative access facilities. We're already seeing that with Earthlink's effort (and to some extent, Google's) effort to get involved in muni-wireless, though this model may have a hard time competing, depending on how its implemented and how technology and spectrum issues evolve.

Lippard said...


AOL didn't own the pipes, but neither did its competitors who drove it to open up full Internet access, the ISPs and Internet backbones. (BTW, AOL did own its own backbone, ANS. It traded ANS to Worldcom in exchange for the service and subscribers of CompuServe, and ended up rebuilding its own IP backbone, the AOL Transit Data Network, ATDN.) The last-mile telcos were pretty late to the game here, and have picked up the bulk of their Internet assets through acquisition and developing DSL, where they're still playing catch-up to cable (though they are catching up). Cable has a firm hold on higher-income customers, probably because they were the early adopters.

I think talk of "duopoly" exaggerates cooperation between cable and telco (they are fiercely competitive) and overlooks the growing role of wireless to create further competitive pressure.

mitchipd said...


My point about AOL is that competition (from all ISPs) drove them to open up the Walled Garden. Incumbent pipe owners don't face anything resembling the competition you describe as impacting AOL.

Duopolists don't have to "cooperate." They just have to do what's in their best interests. So, today we see broadband ARPUs and margins holding steady or increasing, in spite of short term promotions that impact market shares at the margins of 50/50 (telcos focus more on having a lower price, cable operators more on bandwidth advantage--a pretty comfortable market equilibrium).

Yes, there's some competition. But both entities have a shared interest in squeezing the margins of web-based service providers.

They don't have to cooperate, only respond to each others moves, which will be relatively conservative and aimed at maximizing margins, controlling the pace and economic viability of new service introductions, etc.

Both sectors have historically been high-margin monopolists very used to leveraging their access bottlenecks to expand their market power into upstream or surrounding markets. It's only reasonable to expect that'll continue in the way I suggest. No "cooperation" is necessary.

The growing role of wireless is a possibility, not a reality. Let's see how Clearwire, the only real substantial wireless entity does as it rolls out service. Verizon and AT&T/BellSouth own two of the three major mobile carriers, with Sprint Nextel, the third, aligning with major cable operators. T-Mobile is a questionable competitive threat to them. And Sprint, Verizon and AT&T (after it acquires BellSouth) will also control much of the 2.3 and 2.5 GHz spectrum out there (aside from Clearwire's 2.5 GHz holdings).

Perhaps the upcoming auction (starts early August) of more 2.3 GHz spectrum will yield new players. If not, I'm not very optimistic about wireless.

Another wireless possibility, supported by Intel, MSFT and Dell, is to open up some returned, unused but not auctioned broadcast spectrum (known as "white space") to unlicensed use. But broadcasters are likely to fight that one and it could end up so hobbled (like LPTV) by broadcaster-driven restrictions that it becomes a non-starter. I'll be interested to see how that provision ends up in the Stevens bill and any bill that makes it to Bush

mitchipd said...

I forgot to mention that the margin squeeze on web-service providers is likely to be exerted most strongly on small players, which is what has happened historically in the cable TV industry.

Some content and service providers will have enough leverage (like ESPN in cable and very recently in web-based services) to counter the market power of pipe-owner broadband ISPs.

Smaller players (e.g., startups, independents, non-profits, individuals, etc. that aren't affiliated with a content or web-services giant) will not.
Therefore, their margins will be squeezed the most. And perhaps, as in cable, they'll have to provide significant equity shares to pipe-owners to get terms that allow them to become economically viable. I concede that this cable-TV analogy isn't perfect, but I think something along these general lines will occur. The beauty of the Internet is that consumers get to choose the content and services they receive, not pipe-owners.

RedBankTV said...

Jim, thanks for the reply. I think the added value approach really is how the ISPs plan to go and I think the NN debate needs to focus more on this aspect. I doubt enough consumers would be willing to pay the ISPs for extra dedicated QoS bandwidth to generate that much revenue. The way the ISPs stand to make money off of their additional bandwidth is to start selling out portions of it to content providers, not by charging the consumer.

You said: Given the way I've written it, a provider could offer a plan such as you describe (pay for 10 Mbps, get an extra 5 mbps dedicated to MSN services)--but you would also still be able to pay for 15 Mbps of full Internet. You'd have to pay for that extra 5 Mbps in that case, though.

My problem with a provider offering the bundled in VPN-like additional bandwidth is that it results in the ISP’s partner having a new competitive advantage that we have not seen in the existing internet business model. In our example MSN’s services would shine over competitors like Yahoo due to the dedicated extra bandwidth. And based on the way we have seen ISP’s operate they would not offer that deal to both MSN and Yahoo, they tend to pick one partner in a segment. I think that over the long run this has potential to damage growth of internet businesses; I’m not sure how to handle this. Any thoughts? -- Tom

Lippard said...

Mitch and Tom:

I think we already have some approximations to that model today.
For example, there are content distributors like Akamai and Limelight who have relationships with the eyeball customer providers, as well as content providers who already have private peering arrangements with the eyeball customer providers. Those who use Akamai or have private peering with the telcos and cable companies do already have an advantage above those who do not, and Akamai and Limelight provide a method for small players to get the equivalent of a lot more interconnections at a lower cost than negotiating all of those interconnections themselves.

I think that we will see this model extend to VPN-like services through inter-provider VPNs and inter-provider QoS. There will be mutual benefit in large providers doing settlement-free peering for higher classes of service, which will also provide competition for content providers to choose which large providers to connect to.

Mitch: The eyeball customers get to choose what to look at, but the content providers' spending (on number and location of server resources, and quantity and diversity of bandwidth) determines how many of them can look at one time. That's always going to be the case and will always give those with more money and resources the ability to have greater reach. The trick for the little guy has always been to find ways to piggy back on the bigger guys or work together with other little guys. This has always been true of every medium, from Internet to television to the printed page to the spoken word.

Lippard said...

Mitch, re your 2:06 p.m. post:

Do you see a possibility or likelihood of institution of a walled garden in the consumer broadband space? How would you see that happening? It seems to me that the moment one guy does it, they're going to severely alienate a huge percentage of their customer base and drive them to the competition, unless the competition does it at the same time. And if they both do it at the same time, the customers of both will raise holy hell through the courts.

Personally, given the choice between a 15 Mbps walled garden cable connection for free and a $200/mo business T1 with full Internet (that was the approximate local loop cost to my house about six or seven years ago), I'd take the latter.

mitchipd said...

Thanks for the reply Jim. I'm not sure I followed totally since I have to admit my knowledge of peering and related areas is pretty weak. So I appreciate the chance to dialog with you, which might help upgrade my understanding and opinions. I'll think about your replies and may get back to you later with further questions or comments. I'm off for the evening now. Thanks again for the dialog. Its a nice change from the political blogs, where things can get a bit overheated. Thanks to Tom as well.

Anonymous said...

You seem to have focused entirely on the customer side of things, but I think the bigger danger is on the content provider side. Severe discrimination in pricing to competitors is a problem as ISPs become content providers. I believe that ad hoc pricing discrimination should not be permitted on any infrastructure that is based on government-backed appropriation of private property. I say "ad hoc" here to contrast to structured discrimination such as volume discounts.

Repeating my response from your previous comment:
The question [is] ... whether it is a governmental appropriation of private property. Cox enters into a franchise agreement with the local municipality, but they use my property, not the city's, and I am not a party to those negotiations and have no right to refuse (nor am I compensated)....

When companies request special treatment by society through the proxy of our government and use legal force to appropriate private property, even small amounts of it, then society has a right to ensure that the appropriated property is used to the benefit of society.

So, for instance, I believe that if you use the WiFi at Starbucks, they have every right to limit bandwidth to the Seatle's Best Coffee site, or completely block access to anti-Starbucks sites. Starbucks may be an ISP in this case [you might even say they are providing "last-mile" service], but the infrastructure they put in was entirely at their own expense, without resorting to governmental force. Cox's infrastructure was not created completely at their own expense, but rather through the force of government, so their situation is completely different.

Lippard said...

Rob: "Cox enters into a franchise agreement with the local municipality, but they use my property, not the city's, and I am not a party to those negotiations and have no right to refuse (nor am I compensated)"

This should not be the case. The city should only be able to grant CATV access to *public* rights of way and easements, not private property. If access to your private property is granted, then this should constitute a 5th amendment "taking" and be compensated as per Loretto v. Teleprompter Manhattan CATV Corp.

I agree that eminent domain should be restricted to genuine public use--I think that removing special privileges granted to telcos is desirable, as well as agree with you that it provides justification for treating them differently (i.e., regulate them) than if they came to hold those assets without government assistance.

Anonymous said...

Jim:This should not be the case. The city should only be able to grant CATV access to *public* rights of way and easements, not private property.

I go into it with a bit more detail here, but the "public" right of way in front of my house *is* private property. It is property that the government has the right to use for public service, but does not own or have the right to sell to other private parties for their private use. Whether the telco or the cable company pays the government for the use of *my* property is irrelevant. They did not get my permission or pay me a price we freely negotiated. This is why I see no difference between telco and cable regulation, but would not regulate the cost/bundling/etc of most last-mile solutions that involve RF, satellite or microwave. (If the provider received exclusive use of a frequency band, the question might be more complicated.)

A key question here beyond the property rights issue is whether the government has created an artificial monopoly. Is any cable company who wants to lay cable through the right of way able to do so, or just the first to request and pay for it? If only one cable is allowed, then the government should demand that competitors share it, because it is the government who said there could only be one cable.

mitchipd said...


I'm just getting back to this thread. On your question about imposition of walled gardens, my sense is that this will happen gradually, starting at the margins, as some "premium" deals get done.

Each side of the duopoly will probably begin doing some such deals, all the while watching each other's competitive moves so as to not put themselves too much at risk of losing too many existing or new subscribers due to making big changes that alienate them enough to switch (which is not a painless exercise for customers). This is how duopolies work. When you have only two players in a market, the competition tends to be much more "structured" vs. a truly open market where new entrants can suddenly disprupt the comfortable equilibrium.

Gradually, over time, a larger portion of IP bandwidth will be assigned to "premium" services, again with both sides of the duopoly avoiding moves likely to increase churn in ways that more than offset the benefits they gain from their migration to "premium" services.

In the example you cited, of your willingness to pay a lot more for full Internet access vs. walled garden content, the trend will be that this price differential will tend to increase in ways that optimize cash flow for the access providers. When there are only two players in a market (especially an essential bottleneck market with some vertical integration by the pipe-owners), its relatively easy to "optimize" your pricing in terms of cash flow, market share etc. Not so easy in a truly competitive market, where you face multiple competitors exerting pressure from multiple angles of pricing, packaging, positioning, service offerings/features, deal-making, etc.

To me, it comes down largely to the issue of market power and duopoly competitive dynamics.

You mentioned Akamai in one of your comments. My understanding is that the CDN market in which they're a major player is fairly competitive, especially if you include "dedicated" CDNs as well as portals like AOL, Yahoo, Google, MSN, etc.

So, whereas these players have some market power vs. small content and service providers they deal with, they're still subject to reasonably healthy competition. So, if, as a "little-guy" content provider, I don't feel like I'm getting a fair deal from Akamai, I can look to a good number of other options to handle my content. And, since there's a fair number of options, I can choose the one that works best for my business needs.

But, when it comes to the local access pipe, the choice is pretty much cable or telco or, in most cases, you'll need to deal with both of them. They know that and are very used to leveraging that market power to squeeze little guys beyond what an Akamai could get away with.

If Akamai tried to squeeze too hard, an existing or new competitor could develop a service designed to capture the "excess profit" Akamai is trying to extract (that happens all the time in competitive markets).

But that's not going to happen in the access market, unless spectrum rules are changed substantially (e.g., free up broadcast "white-space for unlicensed use without onerous interference restrictions pushed by broadcasters), muni-nets are allowed without restrictions and even encouraged, etc. BPL is a possibility, but not a strong or likely one, for a number of reasons, based on the research I've done. And I'd consider all of the above somewhat speculative as serious and widespread market entrants.

Basically, duopolies are not healthy markets and vertically-integrated duopolies are even more unhealthy. Add to that very high barriers to entry, (i.e., the cost to build a network before any significant revenue is generated, while incumbents, with low incremental costs, can engage in predatory pricing while and after you build out your network) and they're even more unhealthy.

So, the way I see it is that a whole range of highly efficient and competitive Internet-based markets exist and will be created. But their efficiencies will be increasingly distorted as they become increasingly subject to the unhealthy market dynamics of the vertically-integrated local access duopoly that will naturally seek to leverage its market power upstream into content and services (they'd be stupid--and even negligent--not to, at least in terms of serving their shareholders).

Yes, Google, etc. (and end users) will be able to push back some, which will slow this shift (that's partly why I said it would happen slowly). But, ultimately, unless Google (or some other entity) builds a third access network, it can't reach me (and I can't reach it) without dealing with the duopoly pipe-owners, largely on their terms.

If you had to choose between losing Google or losing your access connection, which would you choose? The answer's obvious. One is very valuable (Google), and also very innovative, but much of its functionality and value can be replaced by one or more (inferior) alternatives. The other is essential. Both sides, I think, are well aware of that reality.

As I said at the start of this comment, pipe owners won't be foolish enough to push too hard or too fast in moving to "private/premium IP" services, but ultimately they know the power they have (its probably their key strategic asset, along with lobbying skills and budgets) and they'll gradually push it farther and farther.

And, I'd bet that, at some point in the evolution, even folks like you might be unable to resist the price differential between full Internet access and the premium package they put together. It may not offer everything you'd like at speeds you'd like, but the services offered by pipe-owners, though less appealing than others, will be close enough to what you want, given the amount you'll be saving every month.

Managing the content and pricing of their proprietary services in relation to the pricing and service quality (bandwidth, etc.) of full Internet access will be one of their main strategic goals.

They won't need to (or even want to) hurry moving down this road, but rather will want to maintain a fairly stable equilibrium with the other pipe owner and to work together on the political and legal fronts to insure they retain their duopoly power and their ability to keep moving in that direction. Absent increased competition in the access market, I don't see any reason why this evolution would not take place over some period of time.

My apologies for rambling. I'd edit this down, but I'm too tired right now. Hopefully you can extract something from this. If not, I'll try to be more clear and concise when I'm fresher.